Finding Pre-foreclosure Properties
There are many ways to locate pre-foreclosure properties. Some are obvious, and others require a bit of digging or detective work.
Pre-foreclosure properties are those that are just in the process of falling into foreclosure. Technically speaking, until the property is officially foreclosed it is in a pre-foreclosure status. The earlier you can get to the property owner, the better off you will be. As the property moves through the foreclosure processes, more public notices are issued. Your competition, other active real-estate investors, are also looking for foreclosure deals, too. It's always to your advantage to get to defaulting borrowers as early as possible and be the first rather than the last to contact them.
One of the problems with pre-foreclosure properties, especially in the early stages of a loan going sour, is that no one is willing to admit to financial trouble and that bankruptcy or financial ruin is on the horizon. Accordingly, it is not as easy to identify the pre-foreclosures. It's still possible to find them in the early stage of default, but it's not as easy as reading the legal notices in the local newspaper.
REO Company
REO companies that operate in your farm area are great sources for finding pre-foreclosure properties. As you learned in Chapter 11, these companies specialize in helping lenders protect their investment by properly controlling their collateral. They are in the business of knowing where properties are and disposing of them as quickly as possible for their lender clients.
An REO company wants to keep the cycle going, and so they know the best thing they can do is to dispose of a property quickly for their client. This is why they work with legitimate real-estate investors that are willing and able to close quickly on properties. Make sure you are in contact with your local REO companies and are inquiring about what they might have available in their current inventory.
Bank Hardship Area
Many lenders offer debt counseling and other specialized services for those facing financial hardships. This is an example of how lenders try to do everything they can to stop a loan from falling into foreclosure.
The hardship area is for those with significant hardships. Lenders are not fools. They can quickly determine which borrowers really can't make payments versus those that have decided they don't want to make their monthly loan payment. Generally, the kinds of cases they consider real hardships are:
The borrower was activated from reserve status into the armed forces, and the difference between the previous employment and the current pay of the armed forces makes it impossible to pay the monthly mortgage payment.
The borrower has been incarcerated.
The borrower has been severely injured or stricken by disease and is unable to return to work within a year.
The borrower's spouse died, and the borrower relied on the spouse's income to make the monthly payment.
There are other situations that may allow a borrower to be classified by the lender as a hardship case. For example, one lender might consider the loss of employment in poor economic conditions (where it is unlikely the borrower will find another job) a hardship case.
Lenders that have a hardship program in place work with their borrowers to get out of the loan without detrimental credit reports. Some of these lenders work actively with real-estate investors to sell the borrower's property quickly, if the borrower agrees. These hardship departments can be a great source of leads for you.
Searching County Records
Probably the best sources of pre-foreclosure and foreclosure properties are the records located in the county courthouse. Although the courthouse is only open during regular business hours, the vast information available there makes it an important place to visit.
Watch for actions filed with the clerk of courts. That is where foreclosure actions are commended. In addition, the sheriff's department will advertise pending property sales. Also look for lists from the tax collector's office. Unpaid property taxes are signs of property owners in financial trouble. Some people never pay their taxes until the last minute, preferring to pay penalties and interest. Others just can't afford to pay their taxes and are in financial straits.
Many county courthouse records are now available online. If your county does not have the records you want online, ask if there are any plans to make them available electronically. Not only can you get the information as early as possible, you can save many trips to the courthouse while working comfortably from your home.
Flyers
Another way to locate properties is to prepare and distribute flyers. These mini posters quickly announce that you are actively purchasing real estate and encourage people to call you. The flyers should be distributed everywhere. The more people that see it, the more phone calls will be generated. The flyers should be sent to:
You should also post flyers on community bulletin boards at grocery stores, markets, Laundromats, diners, and other similar places. Use colored paper to make the fliers look unique and professional.
Bankruptcy attorneys
Title companies
Real-estate agents
CPA firms
